I intend to discuss current tax situations that are relevant to taxpayers today. I want taxpayers to be aware of potential tax credits and deductions that they may be eligible for. It is my experience that it is easier, and most cost effective, to do things right the first time.
Please remember that no matter who prepares your return, or how much you pay to have your return prepared, the ultimate responsibility for the information in your tax return lies with you, if you are the taxpayer who signs that return. Although, a fraudulent preparer can be fined or worse, you are still financially liable for any tax you would have owed in the first place, and potentially liable for any penalties and interest that may have accrued since the due date of a questionable return.
How often does the IRS come after the taxpayer in a situation where there is an issue of malpractice with a company? is it pretty common?
ReplyDeleteYes, very common. This is one way the IRS is utilizing it's limited resources. By finding a bad preparer and auditing their client list, they are maximizing available man hours. Be careful of anything that sounds too good to be true!
DeleteThe taxpayer will be liable for any tax that would have been owed if the return had been prepared correctly. Penalties may be waived on a case by case basis.
Many tax preparing companies, such as H&R block offer a guarantee. If you are audited and they did something wrong, they will pay your fees and penalties for you. I think it is a great benefit.
ReplyDeleteThank you for your comment Trina. You are correct; it is good to have such a benefit. However, be weary of some of those assurances. You are generally only covered by this add-on if the preparer makes a mistake, but not if you omit or overlook some information. Those assurances companies offer generally do not reimburse you if a poorly educated preparer does not take a deduction you could have qualified for. You only have 3 years to go back and receive a refund you are entitled to from the IRS.
DeleteAll of the tax professional's that I network with carry insurance that will cover their client's penalties and interest in case of a mistake, and the client doesn't pay extra for this either. This professional liability insurance is commonly referred to as errors and omissions insurance.
The tax industry is highly unregulated. Find out how many years experience your preparer has and if they choose to obtain continuing education. A responsible preparer will take at least 15 hours of continuing education each year.
It makes total sense that a tax preparer should update their knowledge as the tax laws change so often. It is good to know your advice to prescreen my potential tax preparer. I would have probably not thought of that. I probably would have judged them by the size, location and amount of business at their office. Thank you.
DeleteThe tax industry is highly unregulated, so it is up to the tax payer to ensure they are receiving quality representation. A tax office can be busy because they are dealing in quantity rather than quality. There are many large, reputable firms in Las Vegas that train and compensate their employees well. However, there are some busy tax offices that just carry a large amount of insurance to cover the errors their underpaid staff make.
DeleteI look forward to your posts. My fiance and I have recently started our own business, and I am always looking for LEGAL tax deductions. It seems as a business owner we are constantly paying for licenses, insurance, etc. As a bookkeeper, I know many of the items we can deduct, but it always works in your best interest if you are informed. Thank you for sharing your knowledge.
ReplyDeleteYou are welcome Karel, as a bookkeeper you may be interested in tax updates to keep yourself up to date on what to expect each tax year. You could look into a very inexpensive method of continuing education that I highly recommend at fastforwardacademy.com. For example, last year one of my CEs was: Federal Tax Law Update 2012. I noticed this company is giving 2 free hours of continuing education right now if you know anyone that is interested. The best advice I can give you starting out is please substantiate all of your expenses, especially your mileage log - this log needs to be contemporaneous and not recreated in case of an audit. Best of luck!
DeleteGood job, It looks like your site is very active.
ReplyDelete